June 13, 2006

Corporate Ethics in Peru: CSR for thee, but not for me?

It’s time for NGOs to practice what they preach – and emulate what a company is doing in Peru

Paul Driessen

“Wheezing smelter smokestacks” engulfed “dingy” buildings with pollutants and dusted the hills, streets and homes of La Oroya, Peru with powdery rock laced with lead and arsenic, Newsweek reported in 1994. Pipes from the 1922-vintage smelter fouled the local river with lead and other wastes. This “vision from hell” imperiled the health of children, adults and wildlife alike.

Peru’s congress had just enacted new environmental laws, and the government was trying to sell the mine and smelter, which it had mismanaged since nationalizing them 20 years earlier. But estimated cleanup and pollution control costs were so high that not a single bid was tendered during an auction. Finally, in late 1997, a company that later became Doe Run Peru bought the complex.

Doe Run eliminated most heavy-metal discharges into local rivers, began converting old slag piles to grasslands, and by 2006 reduced particulate emissions 35 percent and sulfur dioxide (SO2) by one-fifth, from 1997 levels. Additional improvements in wastewater treatment and air quality systems will soon reduce pollution even further.

When tests revealed that blood-lead levels in workers, spouses and children were unacceptably high, due to the legacy of contamination, Doe Run began reducing lead emissions (by 28% thus far from 1998 levels), built shower and laundry facilities for workers, and instituted regular cleaning of accumulated dust from streets and homes. Blood-lead levels now meet US (OSHA) guidelines for nearly all workers, and children’s levels are likewise improving.

When I visited La Oroya last year, I was also impressed by company projects to improve economic and living conditions, including a municipal sanitary landfill, paved roads, modernized schools, a youth center and clinic, 100,000 new trees and acres of flowers. Because many homes don’t have bathrooms or even running water, Doe Run built public laundry and shower facilities that cost little or nothing to use.

The company also sponsored cleft palate surgeries – and jewelry making, electronics and business management classes, enabling locals to open scores of new businesses. To improve agriculture, it removed debris from irrigation channels; imported better breeds of grass, sheep, alpaca and cattle; and provided medicines and medical treatment for animals.

These projects and Doe Run’s $140 million investment (through 2005) epitomize “corporate social responsibility.” They have created a new sense of pride and hope for the region’s 50,000 people. At a union-organized event, people told me their lives had improved more in the past seven years than in the previous 75.

But when the company sought a 4-year extension on the deadline for completing a facility that will scrub SO2 and convert it into products that can be sold overseas, anti-mining activists hyperventilated. Led by Oxfam, EarthJustice, the local archbishop, a Presbyterian missionary and various news media, they acted as if Doe Run had caused the children’s high blood-lead levels. They ignored the efforts to reverse decades of pollution and neglect, and the fact that physiological processes require time to eliminate accumulated lead from blood and bone marrow.

They exaggerated the effects of sulfur dioxide, saying it is “poisoning” people, and opposed any extension in the deadline. Perhaps Doe Run could have built the SO2 plant more quickly (with just a two-year extension), but it’s made significant progress on every environmental front, and La Oroyans don’t want the plant shut down and workers laid off, just to speed the process a little, said mayor Clemente Quincho. “The people are the ones who live here,” they’ve endured these problems for decades, and almost 90% of them support the extension, he emphasized.

In the end, the mining minister granted a three-year extension for the SO2 plant, but added several new health and environmental requirements. It was the right decision, as the activist claims were almost entirely without merit.

Doe Run said it will finish the facility, continue making community improvements, and promote sustainable (and sustained) development throughout central Peru. La Oroyans celebrated, and newly (re)elected President Alan Garcia said he supports foreign investment and accelerated economic growth.

Meanwhile, one critic demanded that Peru cancel Doe Run’s contract, and the St. Louis Post-Dispatch said Doe Run should “start cleaning up homes, schools, shops and streets around the smelter.” Of course, Doe Run has been doing that for years – which the paper would have known, had it bothered to check.

As to the activists, after blasting companies for years over alleged ethical failings, Oxfam finally agreed to a code of conduct governing its own operations. The move came in response to criticism that activist NGOs have refused to hold themselves to the same standards they have demanded for others. CSR for thee, but not for me, is the general attitude.

Oxfam now says it will meet “high standards” for transparency, accountability, ethical fundraising and staff diversity. Whether it will require honesty in anti-corporate campaigns is not clear.

The minister, mayor and citizens of La Oroya, and corporate watchdogs should ensure that Doe Run continues to live up to its commitments and completes the SO2 plant on time. But they should also keep an eye on Oxfam and its allies – and might want to ask a few questions:

If you care so much about children’s health, why did you wait until Doe Run arrived to voice concern? Why didn’t you challenge its predecessor, Centromin Peru, which did almost nothing about air or water pollution, lead dust and blood-lead levels, or living conditions in La Oroya and nearby communities?

Why do you attack only foreign companies – and not government-owned companies in Cuba, Mexico, Peru or Venezuela?

Why do you blame Doe Run Peru for problems that were caused primarily by its predecessors – and expect an overnight cleanup of 80-year-old problems?

How much money did you spend on anti-Doe Run campaigns? How much helping the people of La Oroya and neighboring villages with actual bricks-and-mortar projects? How much money did you raise, by using these dishonest anti-mining campaigns as a sales pitch?

How is it socially responsible to oppose foreign investment, property rights, and energy, mineral and economic development – thereby promoting an “equal sharing” of misery and stagnant wealth?

Who will hold you accountable for the delays, lost jobs and revenues, abandoned investment plans and prolonged poverty that your anti-mining campaigns cause? What kinds of fines or other “accountability” would be appropriate?

These are critical issues for countries trying to create new wealth, greater opportunities and improved health, by attracting foreign investors that can bring modern standards and technologies. They should ask these questions – and demand answers.